Český Objektiv |
How to secure retail premises – not!
Prague continues its exponential growth and evolution into a fully fledged international capital city, able to hold its own with any other western capital, boasting a diverse, affluent, transient population with healthy dose of foreign nationals - a mix very attractive to overseas retailers.
Picture the following scenario. A foreign investor wishes to expand into the Czech market by taking prime retail premises in the centre of Prague. Having formulated a business plan like she has done in other cities in the past, she expects no undue problems and begins to search for suitable premises. She has more than enough working capital, a local management team in place and a proven business concept with which to break into the existing market.
Plain sailing? Hardly. The only premises offered in the short term are mediocre retail premises hidden in a back street [or worse] with insufficient footfall, this for an unacceptable term of one year and at a rent which seems extortionate [yet the owner insists the rent has not changed in 9 years – honest!].
Unperturbed, armed with a detailed specification of her requirements, the investor contacts all major real estate agents in Prague offering commercial premises to let. During the following week the investor gets two responses, both described as ‘highly matched’ to stated requirements, but were not even close – and these from agents who advertise that they can source ‘the impossible’. The only other offerings were ‘fantastic opportunities’ in one of the now many [and occasionally underperforming] shopping centres on the outskirts of Prague.
The investor reaches for the phone to call the larger international agents who regretfully do not handle such small matters. So the investor starts to approach owners of suitable locations directly but receives no responses.
Despite the breathtaking pace of change in the last 18 post communist years, some things remain unchanged.
Local real estate agents will often rely upon a long standing network of contacts to source business premises. An acute lack of supply and heavy demand ensures rents are kept astronomically high – resulting in a lot of talk, but in reality, little action. Factor in the desire to retain business premises taking hard cash, means that rents now demanded can barely be supported by any legitimate retail business.
Strenuous efforts are made on the nightly news to demonstrate a clean up in business practices – with a new investigation of a corruption case given airtime every day. But there remains a steady flow of reports concerning corrupt civil servants to be found somewhere in the country, at some level or other.
In the meantime, die-hard old fashioned attitudes and male dominated business practices continue be outpaced by the lightening quick growth of the free market economy. Currently, there seems little will to rock the boat and change the status quo.
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Czech before you buy s.r.o. – Converting requirements into reality |
